What Would You Do?

Dirt Pusher

A friend of mine has been after me to go into business with him for a little while now, and today he stopped by and has just about everything worked out to get started. A mutual friend of ours has his own machine shop and wants to get us started in excavating (on our own) He will put up all the money we need to get started and wants to buy our equipment and ect... to get us started. We would have about 6mons of work to start with, we also have many friends that have small businesses that would use us from time to time. I'm a little leery to do this the way the economy is, although I'm only 31 so I'm still young enough to find something else if it wouldn't work out. Still a lot of details to work out but its something to think about... any thoughts? Thanks

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Nothing Runs Like A Deere

genecarp

what is at risk, for you?

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Dirt Pusher

Nothing more than quiting my job now, so far...

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Nothing Runs Like A Deere

genecarp

if you are a wall street guy making 250,000 a year, its a big risk. However, if you have a mediocre job, the risk is low. the upside potential is big, opportunities like this dont come every day. alot can go wrong with friends and biz, but sometimes you just have to GO FOR IT

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dayexco

friends make lousey partners....i was in a partnership years ago with my brother...we didn't speak for 5 years after we dissolved the partnership...having somebody front the financial end of your operation makes you an employee...not a partner. my son is part owner of our company now, but only because we can bark at each other and walk away for awhile and not stay peed off...

were it me? if you got the fire to get in biz...put together a business plan, talk to an accountant, feel out your local market for potential work, talk to people you'll potentially be working for....and get a bank/SBA loan and do it on your own. just my 2 cents

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someday, i'll be as patient as Nick.

Dirt Pusher

No wall street guy here I know what you mean about friends, that's for sure! I've been in excavating for 13 years now and always wanted to try it on my own but never had the kahunas to and never wanted to put up that kind of coin. So maybe I should stop talking my self out of it and give it a try. The only thing that would suck would be walking away from a good job with a very well respected excavator and my thing not taking off.

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Nothing Runs Like A Deere

Dirt Pusher

"having somebody front the financial end of your operation makes you an employee...not a partner" I kind of think that way to but this guy would be our ''bank'' for the time being, he wouldn't have his fingers in it any more than a bank would...

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Nothing Runs Like A Deere

dayexco

oh yes he would...should you be successful, and he gets his return on the money...and you're making more than you ever thought you would...profits are great, maybe he doesn't want out? you might want to have an atty. draw up an agreement saying he'll sell..but me? i'd avoid it like the plague and use a bank.

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someday, i'll be as patient as Nick.

Dirt Pusher

You make some very good points. These are some of the things I had mentioned to my "future partner" but I keep getting reassured things will be fine LOL. Its one of those things I guess If it sounds to good to be true...

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Nothing Runs Like A Deere

tgeb

I would agree with dayexco.

I have seen plenty of long time friends end up long term enemies over these kind of set ups.

Do it on your own, no one to blame for failure, no one to take credit for your success.

How much money do you need anyway? All the equipment manufacturers have 0% loans now, with little or no money down. Do a lease purchase if you have to.

You say you have 6 months of work lined up? That's more than I had 22 years ago when I signed a $50,000 note very with little in the bank.

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Tom

www.gebcon.com

dayexco

then what you need to do is...being you're all friends? say....let's keep it this way...why don't we all sit down with an attorney and an accountant and get some input from them?

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someday, i'll be as patient as Nick.

Dirt Pusher

Well let me give some more details. As far as the 6mons of work, he is going to build a new machine shop, so I would have that, and hes going to build a new house, would have that also. Plus some odds and ends stuff from some other guys. To start I would have a D3, 953b, mini x and a skid loader, that he purchased and would be mine to do the work with and go after other jobs.

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Nothing Runs Like A Deere

rino1494

I agree, stay away from partners.

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denick

Dirt,

I would put in with Day, partnerships are very tough let alone one with friends. What is the basis for the partnership. Who's the boss? who's the estimator? who's the mechanic? who's the business brains?, who's the operator? Who's going to work 65 hrs a week and who's not? Who's a dominant personality and who's not? etc, etc, etc,

If your bank is also your client who says how much you charge and when you get paid? When can you go get other work? There's a ton of these questions.

I went through this 30+ years ago it still hurts to think of what happened to 2 nice guys. And we thought we had all of the above figured out.

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Nick

"Every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving" Albert Einstein

dayexco

you are still together Nick? if so....that says something

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someday, i'll be as patient as Nick.

denick

Not my wife day! She's put up with all that and more.

That business lasted 4 years. Not something I would do again.

Dirt are you married? any kids?

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Nick

"Every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving" Albert Einstein

Dirt Pusher

Yes I'm married no kids. Wife works full time carries our benefits and is going to school.

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Nothing Runs Like A Deere

denick

That makes it easier!

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Nick

"Every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving" Albert Einstein

Dirt Pusher

Like I said before, Hes been after me for awhile to do this and I kept saying no. But here lately at work I've been working with this one site foreman that is a complete dumb And they won't do anything about it, so this opportunity is looking better and better...

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Nothing Runs Like A Deere

Vermaraj

Try thinking outside of the normal partnership model. For instance they put up the money and the equipment to get the business off the ground. You work for 65% of the going rate the other 35% is used to buy into the business. Profits are split by ownership percentage. That way you slowly earn your share of profits and if things don't work out you are not leaving a big stake at the table.

Or, determine upfront a fair equipment cost per hour. Your money partner owns the equipment and gets his return based on the number of hours the equipment is used. You get paid based on the work you can bring in minus fair use of the equipment. above a certain threshold you split the remaining profits by ownership. This maintains your standard of living by basically guaranteeing your salary before profits are split. Your partner is also guaranteed a fair return on his investment. He is also absorbing the losses if the equipment sits idle.

These are all variations of the standard partnership agreement where you get x%, he gets y%. The problem that arises is shortly into it one partner determines that by doing nothing he still gets a good portion of the profit. Then the other guys realize no matter how hard they work they lose a good portion of the profits. Things go south in a hurry.

If you can figure out what drives the business and tie compensation to those drivers then everyone has to pull the sled to bring home their share of the profits. At the same time if the guy with the money decides after the fact he would rather just take a cut for financing the business (which is fair when you think about it) you don't end up hamstrung or in a difficult renegotiation.